Amtrak trains that make money—really (corrected version)

Posted by Fred Frailey
on Thursday, February 3, 2011

Rare as an albino pony is the U.S. passenger train that can recover its fully allocated costs from the farebox. “Fully allocated” means every little expense category is included, over and above the direct operating costs. In the case of Amtrak, those include headquarters costs, shop costs, and so forth, down to the kitchen sink. Okay, with that out of the way, a drum roll ...
 
Applaud, please, the nameless pair of trains that toil between Washington, D.C., and Lynchburg, Va. After Amtrak’s accountants threw every expense they could think of at trains 171 and 176, they still came away during fiscal 2010 (which ended last Sept. 30) earning Amtrak $2.1 million, on a mere $7.8 million of revenue. That implies a profit margin of 27 percent. (Revenues and costs of these trains between Boston and Washington are included in Northeast Corridor accounts.) Thanks to Alex Mayes for those great shots of northbound train 176 on inaugural day, October 1, 2009.

Fiscal 2011 is shaping up as even better for the Lynchburg trains, which during last September through December made a $1.2 million profit on ticket and food revenue of $2.6 million.

Among longer-distance trains, the New York-to-Charlotte, N.C., Carolinian recovered 90 percent of its fully allocated costs in the first three months of fiscal 2011, and the two pairs of Washington-Newport News, Va., trains made a profit of $500,000 in that same period. Other short-distance trains show profits so far in 2011, but their total revenues include state operating subsidies, whereas the Virginia trains do not.
 
These numbers exclude capital costs. But in the case of the trains I’ve cited, you can argue that capital costs are almost nonexistent. Locomotives last two decades and cars at least three. Host railroads pay to maintain the tracks.
 
Now let’s look at the big elephant in the room, the Acelas, accounting by themselves for roughly one-fourth of Amtrak’s revenues. At first glance, they are truly lucrative. The Acelas brought in $450 million in fiscal 2010, and after absorbing those fully allocated costs, still earned an astounding $101 million. (The Northeast Regional trains took in $470 million but on a fully allocated basis, ended up losing $49 million.)
 
However, there’s a huge “but” to the Acela numbers. They run on the Northeast Corridor, Amtrak’s own railroad, and the NEC’s capital costs are huge. Let’s put aside the capital cost of replacing an Acela trainsets when they come due for retirement. Amtrak estimated in 2010 that the normalized cost of keeping the Northeast Corridor infrastructure in a state of good repair is roughly $450 million a year. In an honest accounting, the Acela fleet must bear its fair share of such costs, and there go the profits.

As Congress soon debates Amtrak’s funding levels for 2011 and 2012, keep these numbers in mind. You’ll hear that NEC trains make Amtrak money, but they really don’t. And you’ll hear that the rest of the network is a money sump, which as you now know, isn’t quite true, either. — Fred W. Frailey

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